In a draft policy blueprint, the conservative coalition government unveiled a range of policy proposals - most involving scaling back government interference - that it said would keep the country's energy industry competitive amid dwindling demand and investment.

"The Australian energy market has undergone significant transformation in recent years as a result of declining demand and changing patterns of consumption," industry minister Ian Macfarlane told a mining conference in the city of Melbourne.

"We cannot afford to just coast along because we are blessed with such a diverse energy resource."

Australian energy resource exports in 2013 were worth about A$69 billion or nearly a quarter of the country's total exports, with more than half of those exports coal, making it the world's No.2 coal exporter.

But profit from coal exports is slowing because of lower coal prices and a relatively high Australian dollar, the paper warned, and energy investment has "peaked and is entering a downturn" as companies shift from construction to production.

Australia will become the first country to develop coal-seam gas for LNG export in late 2014, and "must remain at the forefront of industry innovation...to secure its share in growing global LNG markets", it added.

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